MEDIATION: Homeowners' settlement options vary

Previously, I've written some of the things about the "mechanics" of the Residential Mortgage Foreclosure Mediation (RMFM) program for homestead properties, as well as some of what goes on in the mediation.

There is also mediation available for non-home stead properties, but that can be covered later.

Now, let's cover some of the settlement options available in the mediation sessions in the program.

Let me mention here again for the record: I am not an attorney and can't and won't give legal advice; I am a professional media tor. Even an attorney act ing as a mediator can't and won't give legal advice in a mediation session.

If you or somebody you know is entering a RFMF mediation, there are settlement options available; the homeowner does not have to walk away from their home and mortgage obligation without exploring the options.

Let's briefly explore some of the options that may be available.

There are three main alternatives to the homeowner.

First is retention, where the homeowner seeks to retain the home.

The second is relinquishment, where the homeowner seeks to exit the home using an exit strategy with out residual liability.

The third is litigation, where the homeowner and lender seek recovery of damages or relief through litigation.

Some of the more popular possibilities of the retention option include a reduced interest rate or payment amount for a short period of time, or rescheduling or resetting the date on an ARM loan into the future.

These are temporary fixes that don't cure the default, but they can give the homeowner a little more time to see if he can get back on track with his mortgage payments.

A repayment and loan reinstatement plan can cure the default over a period of time. Under this option, the borrower makes regular monthly payments plus an additional payment to cure the default.

While this may be an easy plan to get the lender to agree to, it usually requires the "catch up" period be limited to something be tween six and 24 months.

Another retention method is refinancing or principle set aside. Using this method requires a new loan from another lender. Sometimes these loans may be from family members or friends.

A "short payoff" might be used here, where the lender agrees to set aside some of the principle of the loan in order to get the loan repaid rather than file for foreclosure.

The option of loan modification results in a permanent change in the terms of the loan. This would usually involve a lower interest rate and, some times, a reduced principal balance.

A modification might ex tend the term of the loan or result in a different loan type. An example of this would be the conversion of an ARM loan to a fixed rate.

Are these easy-to-obtain options? No, because the lender is agreeing to permanently accept a reduced return on its investment. Nonetheless, these are settlement options that don't require the home owner to walk away from the home.

Another possible option is a bankruptcy payment plan worked out in either a Chapter 13 or Chapter 7 bankruptcy.

The options for reaffirmation of the loan and retention, and any possible modifications, should be worked out very carefully, with the homeowner using experienced legal counsel to try to arrange all details before the bankruptcy is filed.

None of the settlement possibilities discussed here is easy to work out, but they are possible and they can allow the homeowner to keep his home. As I said at the start, these are options that can be discussed in an RMFM mortgage mediation session.

Next time, we will deal with some relinquishment options, also known as exit or transition strategies.

Stan Lipp is a professional Florida Supreme Court certified county, circuit, civil mediator who is also foreclosure mediation trained.

Questions? Contact him at (239) 649-5407, by e-mail at splipp@earthlink.net or on the Internet at www.stanlippmediations.com.